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Measuring Conduct And Cost Parameters In The Spanish Airline Market

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  • Xavier Fageda

    (University of Barcelona)

Abstract

This paper develops a model of airline competition. The model is based on a demand and pricing equation system, which is estimated for the Spanish airline market. The empirical implementation of the equation system relies on a simultaneous rather than a consecutive procedure. I test the explanatory power of alternative oligopoly models with capacity constraints. In addition, I analyze the degree of density economies. Results show that Spanish airlines conduct is less competitive than the Cournot solution. I also find evidence that thin routes can be considered as natural monopolies.

Suggested Citation

  • Xavier Fageda, 2005. "Measuring Conduct And Cost Parameters In The Spanish Airline Market," Industrial Organization 0511011, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0511011
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    References listed on IDEAS

    as
    1. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
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    9. Thorsten Fischer & David R. Kamerschen, 2003. "Price-Cost Margins in the US Airline Industry using a Conjectural Variation Approach," Journal of Transport Economics and Policy, University of Bath, vol. 37(2), pages 227-259, May.
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    Citations

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    Cited by:

    1. Hideki Murakami, 2009. "Low-Cost Entry, Inter-Firm Rivalry, and Welfare Implications in US Large Air Markets," Discussion Papers 2009-25, Kobe University, Graduate School of Business Administration.
    2. Hideki Murakami, 2010. "Time Effect of Low-Cost Carrier Entry and Social Welfare in US Large Air Markets," Discussion Papers 2010-31, Kobe University, Graduate School of Business Administration.
    3. Bilotkach, Volodymyr & Fageda, Xavier & Flores-Fillol, Ricardo, 2010. "Scheduled service versus personal transportation: The role of distance," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 60-72, January.
    4. repec:eee:touman:v:61:y:2017:i:c:p:465-471 is not listed on IDEAS
    5. Fageda, Xavier, 2014. "What hurts the dominant airlines at hub airports?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 177-189.
    6. Fageda, Xavier & Jiménez, Juan Luis & Valido, Jorge, 2016. "Does an increase in subsidies lead to changes in air fares? Empirical evidence from Spain," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 235-242.
    7. Fageda, Xavier & Fernández-Villadangos, Laura, 2009. "Triggering competition in the Spanish airline market: The role of airport capacity and low-cost carriers," Journal of Air Transport Management, Elsevier, vol. 15(1), pages 36-40.
    8. Silva, Hugo E. & Verhoef, Erik T., 2013. "Optimal pricing of flights and passengers at congested airports and the efficiency of atomistic charges," Journal of Public Economics, Elsevier, vol. 106(C), pages 1-13.
    9. repec:kap:ejlwec:v:45:y:2018:i:2:d:10.1007_s10657-014-9437-0 is not listed on IDEAS
    10. Sainz-González, Rubén & Núnez-Sánchez, Ramón & Coto-Millán, Pablo, 2011. "The impact of airport fees on fares for the leisure air travel market: The case of Spain," Journal of Air Transport Management, Elsevier, vol. 17(3), pages 158-162.
    11. Joan Calzada & Xavier Fageda, 2012. "Discounts and Public Service Obligations in the Airline Market: Lessons from Spain," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(4), pages 291-312, June.
    12. Cantos-Sánchez, Pedro & Moner-Colonques, Rafael & Sempere-Monerris, José J. & Álvarez-SanJaime, Óscar, 2009. "Alternative pricing regimes in interurban passenger transport with externalities and modal competition," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 128-137, March.
    13. Ofelia Betancor & Juan Luis Jiménez, 2011. "When trains go faster than planes: the strategic reaction of airlines in Spain," ERSA conference papers ersa11p295, European Regional Science Association.
    14. Juan Luis Jiménez & Jordi Perdiguero, 2018. "Mergers and difference-in-difference estimator: Why firms do not increase prices?," European Journal of Law and Economics, Springer, vol. 45(2), pages 285-311, April.
    15. Zhang, Qiong & Yang, Hangjun & Wang, Qiang, 2017. "Impact of high-speed rail on China’s Big Three airlines," Transportation Research Part A: Policy and Practice, Elsevier, vol. 98(C), pages 77-85.
    16. Christiaan Behrens & Mark Leijsen, 2015. "Measuring Competition Intensity; An Application to Air/HSR Transport Markets," Tinbergen Institute Discussion Papers 15-075/VIII, Tinbergen Institute.
    17. Lijesen, Mark & Behrens, Christiaan, 2017. "The spatial scope of airline competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 99(C), pages 1-13.

    More about this item

    Keywords

    Oligopoly; Air Transportation; Multiple Equation Models;

    JEL classification:

    • L - Industrial Organization

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